Bill set to axe IHT loan trusts

Advisers in law firms and product providers will be looking anxiously at the loan trust provisions in the Finance Bill due this month.

Loan-based schemes used for inheritance tax (IHT) purposes have virtually disappeared from the market following Budget proposals appearing to make trustees subject to income tax on the loan amount.

Paul Hartford, of the financial services side of Manchester-based Glaisyers Glickman says: "This looks like another nail in the coffin of IHT mitigation. We have used them in the past, though not a lot, but that does not mean they are not useful."

If the bill does include the tax measures, he sees a return to the traditional route of using straight life assurance.

Other advisers say they will not miss loan trusts, as they take a long time to provide the benefits they claim. Schemes can operate over 20 years, which is too long for a 70-year-old making IHT plans, says one adviser.